NVDA misses topline

Investment Analysis Clubs Saul’s Investing Discussions
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Earnings beat nicely [sounds like there’s one-time factors in there yet or not directly comparable] but topline missed by $60m, ouch $3.18 vs 3.24.

Stock currently down $30.

Near-term results ‘reflect excess inventory due to crypto.’

GM down 290bps QoQ.

Non-GAAP revs up 21% but expenses up 28%.

Q4 guidance for $2.7Bn Street was looking for $3.4 Bn.

Gaming was 1.76b lighter than expected.
Data 792m vs 820m estimated also light.

Down 15%. Almost all due to guidance.

Long NVDA, but maybe not by tomorrow.

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Q4 guidance for $2.7Bn Street was looking for $3.4 Bn.

That’s a fairly huge difference. Will be interesting to hear what is said on the call.

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Disastrous guidance. That’s all I can say about that.

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You can say that again. I tried to warn people away from an overvalued hardware maker when it was at $280 only to get sucked in myself at $180.

The conf call should be interesting!

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You know it is bad when you read the guidance and think the $B digit is a typo. Wow. Didnt have a large position, but did have some options.

The only decent thing for the share price going forward is the announced buybacks. I assume the large increase to $7B by 2022 was not coincidental, and will be deployed significantly this quarter.

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Whew. NVDIA only a 3rd size position for me. I think I bought in when everyone was raving.
Love these forums, Saul and NPI

John

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Someone asked me the following off board:

But what does concern me is first Apple and now Nvdia…are we slowing down somewhat? Could 20-25% soon be the norm, and not 30-40% consistent growth?

I thought I should share my answer with the board, for others who may be worrying the same thing:

I’d have to say that none of us would have been in Apple anyway. It’s a VERY hardware company and there’s no room for iPhones to keep growing at even 15% or 20% forever. People are generally happy with their current iPhone. And, whatever the Nvidia fans say, Nvidia is still a hardware company, primarily based on gaming currently.

Neither of them has anything to do with our companies, which are Software as a Service companies (software leasing, managed through the Cloud), with mostly growing recurring revenue, who help companies in any field run their businesses better. You are over-thinking this.

Best,

Saul

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Indeed Saul. I thought for sure Nvidia was not susceptible to cyclical whims because of all it’s different growth legs.

It’s been a great ride of 6-7x but now that I’ve crashed my x-wing into the swamp may have to unlearn what I have learned here.

Will listen to the call but all the lipstick in all the world won’t help this pig.

Darth

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Apple owner here for many, many years. This company obviously trying to get away from being known purely as a hardware Company and into service and software related fields. Understand though what you are saying.

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I’d have to say that none of us would have been in Apple anyway. It’s a VERY hardware company and there’s no room for iPhones to keep growing at even 15% or 20% forever. People are generally happy with their current iPhone. And, whatever the Nvidia fans say, Nvidia is still a hardware company, primarily based on gaming currently.

Neither of them has anything to do with our companies, which are Software as a Service companies (software leasing, managed through the Cloud), with mostly growing recurring revenue, who help companies in any field run their businesses better. You are over-thinking this.

Best,
Saul

Saul, need some help interpreting:
Do you hold NVDA currently?
Or no, because it’s H/W, not SaaS.

If yes, do you plan to add on in this major pull back?

(For folks who do hold, such a severe pull back could represent an opportunity, unless the entire ‘moat’ etc etc of NVDA has been completely vaporized with this single quarter of very disappointing numbers. Am I wrong?)

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(For folks who do hold, such a severe pull back could represent an opportunity, unless the entire ‘moat’ etc etc of NVDA has been completely vaporized with this single quarter of very disappointing numbers. Am I wrong?)

BrerBear,

Obviously not Saul, but I more agree with you than disagree, though only if you’re willing to hold long-term. (And that comes with the huge caveat that I have not yet read the conference call. We will know much more after that).

More and more, this board seems to be shifting to short-term thinking. I love SaaS as much as the next person, and I have a lot of such stocks in my portfolio. But I also know some of the best long-term gains come after short-term pain. As Morgan Housel once documented, the very best stocks show agonizing short-term drops in between huge runs.

Monster Beverage (NASDAQ: MNST) was the best-performing stock from 1995 to 2015. It increased 105,000%, turning $10,000 into more than $10 million.

But this isn’t a retrospective about how you should wish you owned Monster stock. It’s almost the opposite.

The truth is that Monster has been a gut-wrenching nightmare to own over the last 20 years. It traded below its previous all-time high on 94% of days during that period. On average, its stock was 26% below its high of the previous two years. It suffered four separate drops of 50% or more. It lost more than two-thirds of its value twice, and more than three-quarters once.

From https://www.fool.com/investing/general/2016/02/09/the-agony-…

If Nvidia’s moat remains intact, this will be a wonderful buying opportunity, probably within a year’s time. If not, well, not so much. If next quarter’s horrible guidance is just due to a glut of supplies following the crypto bust, then it truly will be a short-term problem. Just my thoughts.

Matt
Long NVDA
Phoenix 1 Contributor
Intuit (INTU), MasterCard (MA), PayPal (PYPL), and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/TMFCochrane/info.aspx

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Saul, need some help interpreting:
Do you hold NVDA currently? Or no, because it’s H/W, not SaaS. If yes, do you plan to add on in this major pull back?

(For folks who do hold, such a severe pull back could represent an opportunity, unless the entire ‘moat’ etc etc of NVDA has been completely vaporized with this single quarter of very disappointing numbers. Am I wrong?)

Hi Bree Bear,

I was answering a totally different question than the one you are asking. You are asking if now is a good time to hold or enter a position in NVDA. I don’t have a clue, but I, personally, long ago made a decision to avoid hardware companies as much as possible (I think it was Skyworks which finally decided me, but it was based on many companies). Other people may come to different conclusions.

I was answering the very different question: … “Should we expect all our (software) companies to slow down in growth because Apple and Nvidia did?” I’d have to say that question was what very explicitly asked. I pointed out that Apple and Nvidia are hardware companies, while we are in software companies with almost 100% recurring revenue in many cases, and thus said that one had little or no relevance for the other.

Best,

Saul

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I, personally, long ago made a decision to avoid hardware companies as much as possible (I think it was Skyworks which finally decided me, but it was based on many companies). Other people may come to different conclusions.

We were expecting gaming GPU demand to grow as prices that were inflated by crypto demand fell. But prices took longer than expected to fall, and demand took longer than expected to grow. But now that pricing has stabilized, we’re optimistic things will improve. Notes Nvidia chose not to sell its mid-range GTX 1060 GPU into the channel this quarter to bring down inventories.

Kress notably indicates Nvidia expects sales to improve in FQ1 in spite of traditional seasonal weakness.

“Overstock, working down inventories, expecting demand to grow as inflated prices fell, pricing stabilized”

That’s an entire vocabulary of problems you don’t ever see if you are not in hardware companies. It’s all the difference in the world!

Saul

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I don’t think they’re missing topline estimates next Q by $700m because Crypto is lower than 3 months ago.

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At some point Nvidia will come back. Heck, it may blow next Q out of the water and who knows what the market will do in anticipation or non anticipation.

I also warn against textbook “cheap” stocks. Almost always something wrong.

Great companies do hit soar spots. No doubt. I just don’t want to wait on the climb back when there are so many other options. TTD as an example is not having “channel” problems.

Further, I have tried to diversify a bit twice now this year. Both have been my only material losses in what is still a positive year but would otherwise have been more positive. No more diworsification

There is no reason to sell here. No great destruction in the business. I just don’t need a multiple quarter turnaround. And yes it will turnaround quicker than we think. Most likely. Better places for my money however. Enuf w the diworsification experiments.

Tinker

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I don’t think they’re missing topline estimates next Q by $700m because Crypto is lower than 3 months ago.

Najdorf, that’s not the problem. though I have not yet listened to conference call, management was guiding for $0 crypto before. The issue is a glut of GPUs on the market caused by people who bought them for crypto mining during the boom and who are now selling them. Pretty sure, that’s why demand is down and Nvidia is sitting on an excess of investory.

Matt
Long NVDA

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I also warn against textbook “cheap” stocks. Almost always something wrong.

I’m so confused, weren’t you just telling us what a spectacular buy this was at 15x your Next Year earnings estimates a couple weeks ago?

You were pounding the table on it, not warning against it, due to your evaluation of NVDA’s cheapness specifically.

'As of a few days ago it was selling for 15x next year's earnings and 22 or so times this years. For a company with an effective world wide monopoly across the board in almost every aspect of AI ...and everything in-between to where there is no one but Nvidia enabling that enormous vertical market) **and selling as if it was AMD?**

I very much doubt you will find a better price than that for the lifetime of Nvidia absent some sort of worse crash than we just went through

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management was guiding for $0 crypto before. The issue is a glut of GPUs on the market caused by people who bought them for crypto mining during the boom and who are now selling them

Yes, I fully and thoroughly understand the concept, and I’m calling mgmt’s pointing to crypto as BS w/r/t missing next Q estimates by $700 million dollars.

Plus or minus 2%.

You don’t miss by that much when you just put out a new and improved GPU whether re-sellers are selling your old hardware or not. Either their optimistic forecasts are crap, or the cycle has turned/is turning.

However, I’m sure they made that forecast as low as they could get away with in order to beat it next Q. If they don’t, look out further below.

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Yes, given it was Nvidia I thought the rule would not apply.

Clearly the rule applies even to Nvidia.

But Najdor what is this personal hostility towards me? It does not belong here. Put me on ignore or lose the chip on your shoulder.

The rule holds, no exceptions to textbook cheap. I think most here, and my thinking was Nvidia was getting lumped in w AMD and other semi ‘s. As we see now the rule of cheap even applies to a Nvidia. Will not make that mistake again.

Tinker

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Do people not look at GPU prices?

https://ihodl.com/infographics/2018-10-24/chart-day-gpu-pric…

When GPU prices are 30% lower than January this year, you have to sell 40% more units just to keep the same revenue amount, not to mention lower GP. I am surprised it took this long to disappoint when prices peaked in January.

The GPU prices over the past year are a direct result of the bitcoin mania, and are still falling as of October.

This impacted both Nvidia and AMD. Nvidia clearly was not immune to the cryptocurrency bubble. It doesn’t matter if they modified certain GPUs so they could not be used as video cards. Miners were buying everything they could.

This is obviously a short term issue and the real story here, as far as I’m concerned, is AI and datacenters. If it was only gaming I would have zero interest in NVDA.

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